by Xinhua writer Lu Rui
SEOUL, June 21 (Xinhua) -- Market opening and industrial innovation are key to steering South Korea away from the so-called middle income trap, Han Jae Jin, manager of the global emerging markets team of South Korea's Hyundai Research Institute, told Xinhua in a recent interview.
South Korea is one of the few economies that have joined the club of developed countries without being stuck in the middle income trap, a typical challenge for the entire developing world.
The middle income trap is an economic development phenomenon haunting many countries after they exceed a per capita income of 3,000 U.S. dollars.
"South Korea began its economic take-off from 1960s to 1980s, during which time rapid economic growth was fueled mainly by investment and exports," Han said.
As per capita national income surpassed 10,000 dollars, more focus had been shifted to the quality rather than the quantity of growth, he said.
Han noted that under the reign of former President Park Chung-hee, who was seen as a key figure leading South Korea's economic transformation after the 1950-1953 Korean War, large-scale investment and infrastructure construction were boosted through government-led growth, providing a strong impetus for the spurt in economic growth.
"But as the economy gradually matures and takes shape, the country must rely on opening ups its market and innovation to achieve sustainable development," he said.
In the 1980s, South Korean economic growth started to face gear shift and transition problems and efforts had been made to tackle the problems, including endeavors to change the government-led model to the market-oriented pattern.
However, due to various reasons, deeper-level structure issues were not fundamentally resolved and the South Korean society was not fully aware of the urgency for economic transformation until the financial tsunami struck the country in 1997.
The Asian financial crisis gave a severe blow to the South Korean economy and the people ever since started to rethink the country's previous growth model.
After tiding over the IMF crisis in late 1990s, South Korea had regained the engine for the continuous growth of its economy due to contribution of those two key factors, Han said.
In 2018, South Korea's per capita income surpassed 31,300 dollars, making it among the ranks of high-income economies, according to the latest data released by the Bank of Korea.
Encouraging private investment and consumption is critical to building an open market, Han said, noting that speeding up innovation, upgrading industrial structure and cultivating innovative businesses are another key point.
According to Han, despite the impact of the Asian financial crisis that broke out in late 1990s, which battered the South Korean economy, South Korea had regained its growth due to those key factors.
Driven by industrial restructuring and market opening, as well as eliminating restrictions and supporting private enterprises, the South Korean economy has managed to get back on track and retrieved vitality, said Han.
"I think this was the fundamental reason why South Korea was able to avoid the middle income trap," he noted.
However, after dodging the middle income trap, South Korea might still face other economic woes. Although South Korea's per capital gross income has topped 30,000 dollars, exports still outnumber the service sector in its economic structure.
"It is still relevant for South Korea to continue to advance industrial restructuring, otherwise the economy might be troubled by other challenges or traps," Han said.
Speaking of China, Han believed there is no necessity so far to worry too much about the country sliding into the middle income trap.
China has a huge economy and is now devoted to business innovation. At the same time, China is constantly making new efforts to deepen its opening up, Han emphasized.
"China is now on its way toward turning into a big consumer. As long as China continues to maintain stable growth momentum, keep building an innovation-oriented growth model and foster a robust consumption market, there will be no chances for China to get caught in the middle income trap," Han said. Enditem
